France has had effectively no economic growth this year, unemployment is hovering around 10 percent and Hollande's approval ratings are sunk in the teens. The country is under pressure from the 28-nation European Union to get its finances in order, but Economy Minister Arnaud Montebourg has questioned whether the austerity tack pressed by the EU will really kick start French growth.
Hollande's promises to cut taxes and make it easier for businesses to open and operate have stalled, in large part because of the divisions among his Socialist party.
"A major change in our economy policy," was what Montebourg had said was needed, just days after Hollande had expressly said there would be no change in the government's economic direction.
The minister's comments angered the Socialist leadership, which said Montebourg's job was to support the government, not criticize it from within.
"He's not there to start a debate but to put France back on the path of growth," Carlos Da Silva, the Socialist Party spokesman, told the Le Figaro newspaper.
Montebourg represents the hard-left Socialist base, and his departure from the government is likely to anger many of the voters who brought Hollande to office in 2012. Since that time, France's economy has only worsened, and the sense of impending crisis weighs heavily.
French officials have already made clear that the deficit will again surpass the EU's 3 percent target and are negotiating a delay.
The new government is unlikely to include Montebourg or other left-wing Socialists and there will be no new election. Instead, led by Valls, the new Cabinet is expected to work toward smoother ties with the EU.
Montebourg's criticism of austerity — and his pointed remarks about German Chancellor Angela Merkel — have rankled before.
In an interview last week after Germany's economy also showed signs of stagnation, Montebourg said France's neighbor had been "trapped by the policy of austerity." He went on to say "when I say Germany, I mean the German right wing that supports Angela Merkel. It's not France's job to align itself to the ideological axioms of Germany's right wing."
Merkel on Monday declined to comment directly about France's change in government but said she wishes "the French president success with his reform agenda."
source: huffingtonpost.com By LORI HINNANT and SYLVIE CORBET